12th March 2026 > > The quantum threat, central banks, & the UK.

tl;dr

Another review of the quantum threat. The inexplicable deference shown to central banks can only be good for BTC. The UK disappoints again.

Market Snap

Market Wrap

O.I. has materially increased with sustained downward pressure on the funding rate. I don’t understand what additional bad news those leveraged shorts are looking for, but it more likely than not that it does not work out for them.

Occasional Series – Tromsø

I am in Tromsø preparing for this race starting on Saturday:

https://www.ratrace.com/arctic-circle

I notice some contrast between here and Dubai/Riyadh …

Curious Cryptos’ Commentary – The quantum threat

Building upon the recent series of gentle introductions by the CCC to the quantum threat, Ark Invest have pulled together the important elements into a single report:

https://www.ark-invest.com/thank-you/bitcoin-and-quantum-computing

There is little that is groundbreakingly new there except for more detail than we have the space for here in the CCC.

Curious Cryptos’ Commentary – This is why central banks get it wrong all the time

The core function of a central bank is to act as lender of last resort – to the government, or indeed private industry, to mitigate potential economic devastation wrought by a credit crisis. Central banks fulfil this function very well. They should be told to stick to their knitting.

So-called “independent” central banks (no such thing exists, as shown time and time again when they come the rescue of their political masters) have also been charged with controlling inflation and, in some cases, maximising employment. Apparently, it is believed that these objectives can be achieved simply by manipulating the three-month rate of interest, which is a laughable proposition, and has consistently proven to be utter and total bollocks. But still, the technocrats somehow maintain this fiction for their own benefit, and we simply accept it. It’s a crazy world.

Now, courtesy of Trump’s war against Iran (the rights and wrongs of which are not to be discussed here though I maintain a world without Mullahs is a far safer and a far better world) we can see in real-time how ridiculous it is that central banks are allowed to manipulate interest rates. Let me explain.

Before the outbreak of hostilities, it was common consensus that the Fed would cut interest rates two or three times in 2026.

It is now common consensus that oil priced at $100 pb will raise inflation expectations, tying the Fed’s hands into maybe not cutting interest rates at all. The reasoning is that higher interest rates have a dampening effect on economic activity and growth in the medium term (say, around twelve months from now) and hence higher interest rates will lower inflation in the medium term. You can agree or not with that proposition, but it is an accurate summary of the (paltry amount of) thinking that goes into decision-making at the Fed and all other central banks.

Now, let’s look at the impact of the price of oil on the world. As energy is a component of all human activity, it is true that in the short-term (say, three months from now) higher energy prices will feed into the price of everything else, resulting in a short-term jump in the measured inflation rate, all other things being equal.

Two things flow from that statement. Firstly, a general increase in prices will dampen economic activity in the medium term (say twelve months from now) which naturally reduces the inflation rate. Additionally, because inflation measures are relative, in twelve months’ time the lower cost of oil drops out of the calculation of inflation, reducing the statistical measurement of inflation. So, yes, an increase in the oil price impacts negatively on short-term inflation, but positively on medium-term inflation.

If the Fed fails to cut rates because of the price of oil, or indeed raises them, it too is adding to those deflationary pressures twelve months hence. The Fed is effectively increasing any economic woes caused by an increase in oil prices by rigidly sticking to an economic model that fails on any test at all. Any time the central bank raises interest rates, it is telling you that it is deliberately going to make life harder for you and your family. It is deliberately trying to suppress economic activity, lowering your income or job opportunities. It is deliberately raising the cost of capital for business, lowering productivity. It is deliberately making you worse off financially. And in exchange for which we must hope that its musings on the potential future trajectory of inflation have some credence. Which they do not. How does that make sense to anyone?

This is one of the myriads of reasons that central banks should not be allowed anywhere near the process of setting interest rates.

Still, the continual undermining of fiat by central banks is all good grist to the crypto mill, so why complain?

Curious Cryptos’ Commentary – The UK

Fresh from utterly failing to help UK citizens stranded in the Middle East over the last fortnight (I know because I was one of them) the UK has turned its attentions to utterly failing to embrace the crypto revolution.

The problem our politicians and our regulators have is a simple one – they have been blatantly lying about being welcoming to cryptos and have been caught numerous times when the actions taken are at odds with the words spoken. Forced by regulatory developments in both the EU (closer alignment anyone?) and the US to pretend harder about their real intentions, the Bank of England have conceded that stablecoins are going to be regulated in the UK. Which is a start, but there is plenty of scope for the regulation to strangle the UK stablecoin revolution at birth.

One example is the Bank of England has proposed setting hard limits on the value of stablecoins that an individual will be allowed to hold. Intriguingly the reason for this is a fear expressed by Deputy Governor Sarah Breeden whilst giving evidence to the House of Lords Financial Services Regulation Committee that stablecoins will result in a mass migration of deposits away from banks. Well, that is a damning comment on the regulation of banks, and peoples’ fears of another GFC. Stopping a better product coming to market does not solve the underlying problems – it simply makes them worse.

So, thanks to Breeden for accidentally telling the truth to us. I suspect her boss, the hapless and hopeless Andrew Bailey, doesn’t quite understand the import of her evidence.

Breeden then entertained us by channelling her inner Canute (*), making this statement which thoroughly demonstrates she doesn’t have a clue about what decentralisation means:

“Unhosted wallets will not be permissible in the UK …”

Good luck with that. I suggest a daily dose of the CCC will help Breeden get to grips with the crypto revolution.

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(*) I know it was King Cnut but my editor doesn’t want to take the risk of misspelling it.